Hello Friends of NMIRI!

Here are some public policy issues to think about for a better America and New Mexico.

1. How important are property rights to a democracy and to liberty? Some Latin American scholars believe it is essential that individuals have property rights in order to advance liberty in Latin American nations especially. What about New Mexico property rights and the inappropriate hold that government has on land and land values in New Mexico? Is this an issue for New Mexico as an underdeveloped state?

2. The U.S. Mexico Partnership is better than ever according to Heritage Foundation studies and we explore that issue below in a summary of the ideas.

3. What is poverty and how is it defined? An important piece of research on the criteria we use to define poverty in the U.S. and how it is then used politically in very devious ways. How should we think about poverty now in the 21st Century? Since New Mexico has one of the highest poverty rates in the U.S., how does this affect public policy here?

4. How much money do drug research groups provide for philanthropy? When you hear people screaming about the drug companies and how much they make or how they rip off people…think again. As you will see below, of all the charitable giving by industry in 2001 in the U.S., 33.8 percent came from the drug industry. We have a short piece below on this topic.

All of this is supplied to you in an effort to create intelligent and well grounded citizens in NM who can hold their own on public policy issues of our time, especially candidates from all parties. We must beware of those in partisan political arenas that will try to divide us on the public policy issues of our time or those that have a political axe to grind that is self-promoting and often times irrelevant to policy issues for all citizens. Regardless of your political persuasion, it is essential to liberty that all citizens explore the issues of our time. We can all vote more intelligently when it comes time to make the choices. Explore other issues at www.zianet.com/nmiri.

Private Property Rights and Liberty in “Developing States” Like New Mexico
By M Gene Aldridge

It has often been said by those of us who have lived and worked in developing nations, that living in New Mexico (NM) is like living in a developing country. Unless an outsider moving here had the experience of a developing nation first-hand, they might not understand what they see economically, politically, and socially in NM. Let me explain why this is so.

For example, did you know that New Mexico ranks 9th among all states for total ownership of land by the state and federal government? In fact, 47 percent of NM is owned by the state and federal governments combined. This means that 47 percent of the land is most likely not producing any income or revenue for the state or federal government! Congressman Joe Skeen used to say to me, “Gene, we will never solve the problems in NM until the land that is tied up by the feds gets released back to us.” In some cases, there may be leases on some of the land, but by and large little or no tax revenue base is built with so much ownership of land held by the state and feds.

As the Western migration of the U.S. continued West from East, land that was owned by the federal government was eventually turned over to the private sector for development and tax-based revenue generation ensued. Something happened historically as the migration occurred further west. It seems that the government and the states gave up less and less land to the private sector in the great Western migration process. If you look at land East of the Mississippi River, you find that much of it was turned over to the private sector for development, but as we move away from St. Louis and travel West in the U.S., less and less land is released to the private sector. So now our tradition in many Western States is that the preponderance of land is owned by the leviathan (the government), either state or federal.

Currently in NM the BLM, for example, controls over 12,828.4 million acres while the National Forest Service controls about 10,336.7 million acres of land. Other federal land in NM comprises over 4 million acres and the tribal land is at 7,522 million acres. Why does the BLM have to control so much of the land in NM? Why should so much of our real estate be tied up with government ownership of assets? Doesn’t this limit the economic development of NM in terms of economic growth and private sector creation of capital? In fact, doesn’t this data suggest that we might wish to re-think our land use patterns in NM as it relates to potential revenue for our state via bigger tax bases? What happens if the poor own this land and develop it? Would this new condition lower poverty levels in NM?

Hernando De Soto, a Peruvian who heads the Institute for Liberty and Democracy in Lima, suggests in several writings that property reform is crucial to developing nations. What he means is that capital is tied up in property and unless all citizens can have access, the key word is “access”, to the property, it is almost impossible in developing nations to grow wealth as we know it in the U.S. or for citizens to accumulate capital. In two key works, De Soto lays out his interesting thesis; one is called the Other Path and the second work is called The Mystery of Capital. Why does capitalism work in the West, but not in other parts of the world? How might this condition apply to our own state of NM?

The thesis is that there are five mysteries to capital. They are:

• Missing Information
• Mystery of Capital, how is it produced and how is money related to it?
• Mystery of Political Awareness
• Missing lessons of U.S. History
• The mystery of legal failure and property law outside the West

In many countries missing information allows property ownership to go undocumented. No one knows who owns the property. The legal obstacles to actually owning a business or obtaining land, that is often held in state ownership, in developing nations takes many hours, days, weeks, months and years in some cases. In Peru, for example, it took De Soto and his team 289 days just to register their business at a cost that was 31 times the local wage. Legal rights to build a house on state land took over 6 years and 11 months and required over 207 administrative steps. Because this process is so cumbersome, capital gets locked up and much of what could be working capital for citizens is really dead capital. Could the land that exists in NM as state and federal land be dead capital for our citizens? The federal BLM land, for example, alone in NM might be worth conservatively between $12 billion and $300 billion as dead capital assets, not to mention the transaction value associated with the sale and re-sale of such land in our state; nor do we include appreciated value of the land and improvements on the land. All this value exists before taxation even occurs. Why does Missouri have only 11 percent of the land owned by state and federal government and NM 47 percent? What is the difference in the two states as it relates to dead capital tied up in land? Does this disparity keep NM poor and Missouri more wealthy than NM?

The mystery of capital is that is allows for production or greater economic productivity because land can be used to do other things. We mortgage our home and land to grow a business, for example. How many more small businesses and how much greater productivity might we gain by opening up some of the federal and state lands in NM for the purpose of building a tax base, creating new wealth for NM and its citizens, and making existing dead capital work for our state economic development? How can we take our physical assets in NM and get them to work by creating capital? The natural resources (oil and gas) income for the state government will one day run out and the permanent fund for education will have to live on in perpetuity via the interest without any new outside revenues to the corpus. In NM, one of our productive potentials for accumulated assets, namely land in NM, is tied up with the leviathan (government) holding dead capital. Is this good economic policy for our state? One thing is for sure, it limits our tax base for potential growth in NM. Can money and economic growth be understood fully in NM without access to the property in NM? Restricting property in NM has tremendous economic consequences just like it does in developing nations for people who cannot crack open the wealth that is theirs in property. In this respect, NM is a still a developing nation and one reason our poverty rate is high. We lack the ability to generate the business because our land is tied up with state or federal government, thus, we must keep our taxes high to accumulate the money to educate our children, for example. It takes $1.8 billion per year to educate the children in NM. If the government has the money and there is no room for economic growth in NM, how do we create better economic development in NM? We do it by either by lowering taxes or by opening up the land in NM for development so that the tax base can be expanded OR maybe both.

NM needs to increase its productivity through property and land that is now tied up by the federal and state government. Political awareness is the first step in understanding the nature of the challenge in NM and how we are much like a developing nation in our attitudes in the legislature and in the mind of the citizens. Few in our legislature really understand economic growth and so we accept piecemeal approaches and shell games much like that which Governor Richardson is now playing upon the citizens in 2004. Piecemeal solutions will not work. It will take political awareness in our state to unlock the value of our land and property for private sector development. New integrated property systems unleashed in NM will bring new money and new development to our state. Legal property releases in NM will have the same effect that new legal property systems have in third world countries when political awareness allows people to move forward. In this respect, NM is a third world state because too much of our land is tied up in socialistic systems and not capitalistic systems. How many more poor people in poverty will it take before political awareness in NM creates action? Democrats claim they have deep concern for the poor in the state, but yet while they are in full power, house, senate and Governor’s office, they do little to open capital opportunities for the poor in NM to obtain new property and find decent housing and health care. Republicans claim that they care about the poor through capitalism, yet 8 years of Republican leadership at the Governor’s helm produced little reform with respect to unleashing the dead capital in the land of NM. The last Republican Governor was a good man, but he squandered political capital by spending time on drugs rather than real economic reform in land and taxation. You can’t blame him too much even some of my close Democratic friends in the legislature cannot reverse the hold that the socialists have on this state. It is not up to government to be in the business of economic development in this sense. It is up to the private sector to create the new economic development opportunities through investment in property and land in NM. Private capital drives the systems, tax bases ensue from such private capital creativity and productivity.

What De Soto found in his studies of the West is that law allowed for capital formation and economic growth as nations developed. He found that in each nation a few enlightened persons made new laws that saw through the need to enhance access to property in support of property laws. While we do not have the extralegal issues that face other developing countries, NM does have outdated laws related to BLM and state owned land that simply should be released into the free markets for creation of capital formation and economic growth in the state. An effective property revolution for NM is unleashing the lands, using existing property law, to create new economic prosperity for our state.

Legal failure to meet the new needs of NM for the coming century will leave this state in poverty and still unable to meet the needs of new development that will surely come through technological innovation in ways that we cannot dream of today. This legal revolution in NM must go hand in hand with new taxation policy that drives taxes downward while creating even greater revenues for government with less taxation and opening of land and property for our state. The poor in NM will benefit the most because jobs will ensue for them and our state will join other states where economic development is driven by free markets, not government held land and socialistic patchwork that lowers some taxes, creates loopholes for some sectors like food or medicine and then raises taxes overall and pretending politically that we are fostering economic development for our state. This is crazy-quilt legislation and it does not work.

One last note, NM is a third world state because our political values are third world. There will be those who say we cannot afford to open the land, even some of the land, because other resources like water are not available, but that objection, too, will pass. Technology will allow us to have all the water we might need using newer desalinization plants from the Gulf of Mexico to New Mexico just like our oil pipe lines do today. It is already cost effective to do so if we create the volume demand in the West with our neighbors. So the political objections must be overcome, usually by a handful of people who understand that NM is a third world state and we must remove this value set to create a new state that will decrease our poverty levels for greater economic good. Most of our legislators really don’t understand or study the issues that come before them and like blind men and women everywhere they vote like sheep down party lines keeping real ideas, like unleashing of land in NM, from happening. We must find legislators who care about all the citizens, not just their party affiliations to grow our state. It can be done.

The Mexico Partnership
By M Gene Aldridge

The Heritage Foundation has published research (No. 1715, December 18, 2003 – Johnson and Fitzgerald) on the U.S. and Mexico www.heritage.org/latinaamerica/bg1715.cfm) which outlines the nature of the new relationship as partners in reform. Here are the salient points of the article:

• Despite occasional diplomatic squabbles, U.S.-Mexico relations have grown closer through enhanced trade and security cooperation
• Mexico would like to become better integrated with the North American Economy
• To do so, Mexico would like to export its excess labor to the United States to boost its own economy
• The United States and Mexico can improve cooperation on border security and trade as way to get started.
• Over the longer term, the United States can challenge Mexico to undertake institutional reforms that would make it more compatible partner by streamlining the U.S. process for admitting temporary workers.

Most of us who live on the border have seen the difference in working relationships with Mexicans and the U.S. on economic cooperation over the last twenty years. By sharing history and culture, the Mexico, Canadian and U.S. relationship is a strong economic one for trade and commerce. The Mexican economy is still in huge flux and Mexico needs our economy as a release value for its workers. This is good so long as we use the leverage from this relationship to create the reform in Mexico that is necessary and to secure our borders.

Once the democratic process is in better control in Mexico, i.e., any person can get elected through primaries in Mexico and not hand picked by parties, then the U.S. system and the Mexican system for democracy will be much more in synchronization. Protection of monopolies is still a problem in Mexico, but even this is getting better every year. Pemex is full of corruption, maybe as high as $1 billion a year according to their own estimates, but once these issues are corrected over time, Mexico will be in better shape to allow FDI (foreign direct investments) in more competitive ways. Currently the immigration issue is being managed by the Bush Administration as a first step toward more reform for Mexico. It is not a complete approach, but it is a good first step in trying to get Mexico to move toward reform at a better pace economically, politically and socially. The NAFTA experience for those of us on the border is good. It has opened markets and made the border region more accessible to commerce and trade. This study calls for special steps that can be taken to drive reform with Mexico.

1. Congress and the Administration should press for Mexico political, economic and security reforms.
2. The Bush Administration should promote closer cooperation between Canada, Mexico and the U.S. for law enforcement and security.
3. Streamlining non-immigration for workers in the U.S. so that they can come and go with more ease is another step that has just been proposed by the Administration.

Moving on these fronts, the U.S. would do well to take advantage of a President Bush that has a keen sense for Mexico and its relationship with the U.S. The U.S. should continue pressure (realpolitik) as the Mexican reforms take hold.

Poverty in America
Staff Review

In a recent study, Robert Rector and Kirk A. Johnson (January 2004) of the Heritage Foundation explore poverty in the U.S. What they found is as follows:

• The good news is that poverty which does exist in the U.S. can readily be reduced, particularly among children.
• If work in each family were raised to 2000 hours per year –the equivalent of one adult working 40 hours per week throughout the year---nearly 75 percent of poor children would be lifted out of official poverty.
• Nearly two-thirds of poor children reside in single-parent homes; each year an additional 1.3 million children are born out of wedlock. It poor mothers married the fathers of their children, nearly three quarters of the nation’s impoverished youth would immediately be lifted out of poverty.
• Major programs such as food stamps, public housing, and Medicaid continue to reward idleness and penalize marriage. If welfare could be turned around to encourage work and marriage, the nation’s remaining poverty would quickly be reduced.

The nation’s poor number about 35 million, according to this study. After adjusting for inflation about one-fifth of the lowest income households equal those of median American households in the 1970s. For example, among poor households, 45.9 percent own their own home; 72.8 percent own their car; 98.9 percent own their own refrigerator; 55.3 percent have two or more television sets; 73.3 percent have their own microwave and 18 percent have internet access. So what is poverty?

If poverty, for example, means lacking nutritious food, adequate warm housing, and clothing for a family, relatively few of the 35 million people identified as being “in poverty” by the Census Bureau could be characterized as poor, according to this study. The average poor person in the U.S. seems to have a much higher living standard than we first might imagine.
This study explores the details associated with poverty indicators and raises interesting questions for policy makers at the state and local level too.

Walter Williams (January 14, 2004, Human Events,“How Can It Be? -- An Examination of Poverty”), the economist, said of this poverty, “While "poor" Americans don't live in opulence, they are surely not poor either by international or historical standards in our own country. I'm betting if God condemned an unborn spirit to a lifetime of poverty but He left him free to choose the country in which to be poor, he'd choose the United States.”

What might Medicaid be for NM if we evaluated those in poverty carefully in our state? What criteria might states apply to their own assessments of poverty? How do we judge who is really poor and have our standards been changed without us knowing it for each state? What new public health policies might emerge for states under this approach to poverty? Are the rich getting richer, really? No, the evidence is that the poor are better off than in years past and that the rich might be getting poorer. New Mexico would do well to study in depth these ideas and questions as a matter of public policy. The study by the Heritage Foundation can be found at www.heritage.org/research/welfare/bg1713.cfm for those who might wish to explore its details.

Pharmaceutical Research and Philanthropy
Staff Review

Whether you know it or not the pharmaceutical research industry leads the nation in corporate philanthropy, according to the Journal of Philanthropy. In 2001, for example, for all charitable giving by industry, the pharmaceutical research companies gave 33.8 percent of the total giving in the U.S. This compares with commercial banks that gave 8.8 percent in that year or telecommunications which gave 6.7 percent. The next highest giving during that same year was the computer software industries which provided 5.0 percent of all giving.

The pharmacy group companies gave money to education and the arts, medicines for millions of persons, global environment, in helping to raise the standard of living for the poorest in the world, improve health systems in national governments where they were needed and finally, they provided support for such tangibles as water supplies and nutritional education too.

The patient assistance programs have produced measured results in the past few years going from 1.5 million persons who benefited in 1998 to over 5.5 million person in 2002. These same research pharmacy companies have promoted the control of HIV/AIDS and given much to global philanthropy as part of the free market system benefits to the world.

Abbott Laboratories, for example, spent valuable resources on projects for orphaned children who were orphaned as a result of AIDS. Novartis and GlaxoSmithKline are deeply involved in Tuberculosis initiatives to combat the spread of TB in the world. Coartem® is a new combination drug that is supplied by Novartis in the fight against malaria working in tandem with WHO (World Health Organization).

So the next time someone screams at you about the pharmacy groups and how free markets in medicine and health care don’t work, just remind them that capitalism produces far more for people in terms of infrastructure and other benefits than any other system of medical research in the world.

©Copyright NMIRI 2003
This article, from the New Mexico Independence Research Institute staff, fellows and research network, is offered for your use at no charge. NMIRI Syndicate articles are published for educational purposes only, and the authors speak for themselves. Nothing written here is to be construed as necessarily representing the views of NMIRI or as an attempt to influence any election or legislative action. Please send comments to: Editor, NMIRI 2401 Nieve Lane, Las Cruces, NM 88005. Phone (505) 523 8700. We do request attribution be given to both NMIRI and the author when the article is cited.
e-mail is galdridge@zianet.com.